My Roofer is MADDDD I 1099'd him

Tax, SDIRAs & Cost Segregation
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My Roofer is MADDDD I 1099'd him

David Roberts
Brownstown, MI · Member since 2014 · 344 posts · 98 votes

So 2015 was my first full year in the real estate business.  Someone published an article a week or two ago about making sure we get our 1099s together out to our contractors and such.  I honestly didn't know I had to do that, so I called my CPA and asked about it.

I told him that I had a roofer guy do 2 roofs for me (I paid him over 10k) and my main contractor which I paid 27k+ last year.

My CPA suggested I 1099 both of those guys, and to try to get their SSN but if not, still 1099 them to protect the business.

I called my contractor and he was ok with it, although he acted a little surprised I was asking.  He even gave me his SSN.  

The roofer,  I didn't bother to even ask.  He's a roughneck type and I knew he would not be happy.  So I just got the phone call.  I saw his name pop up, and I 'gulped' lol.

I'm not sure he was even aware of what the 1099 was, but he was livid. I  couldn't even get a sentence in without getting cut off repeatedly about how I'm acting like he's done 15 roofs for me and "I've done several others for everybody else and nobody's ever 1099'd me".

When i asked if I could explain what the paper was and why I had to issue it he just cut me off and said he didn't care to hear it.  At the end he told me to lose his number and never call him again.

Did I do anything wrong?  Should I not have sent him one?  I was just trying to protect the business and do the right thing.  I lost a good, cheap roofer over it, too.

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Steven Hamilton IIPro Member
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
10y

You did right. If they didn't claim it thats their issue. They are due to be SENT Jan 31 or this year Feb 1. If they have an issue that's their problem. If I'm paying 600 or about to hit the threshold I get the W9 filled put before I cut the check. No W9 no check and VERIFY the number they are giving you to make sure it matches their docs...

[email protected]224-381-2660
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  • Jeremiah H.
    Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes
    10y
    You hear people say all the time to treat this like a "real business". Real businesses 1099 people. Maybe it's something you should disclose to future contractors, but you did the right thing in my opinion.
    2Reply
  • Patrick LiskaPro Member
    Investor · Verona, NJ · Member since 2014 · 1k+ posts · 832 votes
    10y

    You did everything right, if you pay someone over $650, i believe it is, you are supposed to send them a 1099, its for tax purposes and to prove that you did actually send someone that money if you ever get audited, that you are not just making that deduction up, even though you may have receipts ( they can be falsely made, but you are proving you paid it with the 1099)

    0Reply
  • David Roberts
    OP
    Brownstown, MI · Member since 2014 · 344 posts · 98 votes
    10y

    Yes, my CPA said "you need to protect your business"...so I did.  

    I will be sure to get a W9 filled out ahead of time for all future workers.   The dude was PISSED.  As soon as I saw his number I knew that's what it was for.  I tend to think he probably doesn't do the right thing on his end and that's why he's furious, or he really doesn't know what the 1099 is.  

    He said nobody ever 1099s him.  Well, maybe everybody else he does work for pays him cash or doesn't run their business the right way.  

    I just don't want to get stuck paying my taxes and his.

    0Reply
  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @David Roberts, my suggestion would be to make sure you tell all your contractors BEFORE they start work that you plan to file 1099s.  Legally, you did what you had to do.  

    Businessman to rooferman, you probably should have called him like you did the other guy, before he received the 1099 in the mail to help him avoid "lying" on his tax return.  He might have filed it the day before you sent him the 1099, and he could have avoided the hassle of amending his return had you called him a few days prior.

    4Reply
  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    10y

    You did right. If they didn't claim it thats their issue. They are due to be SENT Jan 31 or this year Feb 1. If they have an issue that's their problem. If I'm paying 600 or about to hit the threshold I get the W9 filled put before I cut the check. No W9 no check and VERIFY the number they are giving you to make sure it matches their docs...

    [email protected]224-381-2660
    5Reply
  • David Roberts
    OP
    Brownstown, MI · Member since 2014 · 344 posts · 98 votes
    10y

    Yes i.will tell everyone from now on up front.   In this case it was ignorance on my part, not knowing i had to 1099, and only thought about it after seeing that blog post (thanks bp).  Ive only been in business for 1 year and this is my first tax return for the business.   

    But in the future for sure Ill get that info from contractors up front! 

    I couldn't even get a word in to tell him what it was (he sounded like he really didn't know,  but saw that it was some " bs papers"). The guy is 50, and been around the block,  so im sure he knows what it is.  I just wonder if he doesn't report much for income and flies low.

    0Reply
  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    10y
    Originally posted by @David Roberts:

    Yes i.will tell everyone from now on up front.   In this case it was ignorance on my part, not knowing i had to 1099, and only thought about it after seeing that blog post (thanks bp).  Ive only been in business for 1 year and this is my first tax return for the business.   

    But in the future for sure Ill get that info from contractors up front! 

    I couldn't even get a word in to tell him what it was (he sounded like he really didn't know,  but saw that it was some " bs papers"). The guy is 50, and been around the block,  so im sure he knows what it is.  I just wonder if he doesn't report much for income and flies low.

     Truthfully of they don't expect it there are bigger issues. I 1099 everyone even those less than 600. But that's how I run my business.

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    2Reply
  • John Stovall
    Americus, GA · Member since 2014 · 22 posts · 18 votes
    10y

    Legally, you are correct. But I agree with others: You should make it clear that you are going to 1099 someone when agreeing on a price. You probably got the best of both worlds: A cash price, where it's understood that no 1099 will be sent, and an IRS proof expense.

    My business partner handles this end of the business, and early on, he stressed that I could not enter into any agreement with an individual without telling him/her. Sure, some people didn't want to bid on our work, but since I live in a small town, I haven't lost any friends.

    1Reply
  • David Roberts
    OP
    Brownstown, MI · Member since 2014 · 344 posts · 98 votes
    10y

    YEP in the future i will state that up front.   I just didnt even know i had to 1099 anyone.  Ignorance on my part. Like i said, i am new in business and learning.

    For sure in the future i will do that.   The 1099 thing never came up in the beginning so it wasnt like we discussed a better cash deal.  The roofer informed me that "im acting like i did 15 roofs for u".  And he said he does this stuff on the side.   But he pulled permits for me each time.  And i paid him by check anyway,not cash.

    0Reply
  • Al Wilson
    Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
    10y
    You did the right thing. And you need a new roofer. Good luck.
    1Reply
  • John Stovall
    Americus, GA · Member since 2014 · 22 posts · 18 votes
    10y

    David, I didn't know either when hiring a roofer. I don't like to give my partner a big head or anything, but I'm sure glad I have him. Running the operations takes more hours, but having someone who knows all this to run financials makes me sleep easier at night!

    Another thing he told me was to be completely honest with our bankers, and whenever we told them we'd do something, to do it. (My inclination was to oversell a project to get financing by giving them the best case instead of probable case analysis on future costs and revenues.) It's made me be more choosy in what I buy, and because of the trust built up over time, they bend over backwards to help us on every project.

    2Reply
  • Mike F.
    Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes
    10y
    Originally posted by @David Roberts:

    YEP in the future i will state that up front.   I just didnt even know i had to 1099 anyone.  Ignorance on my part. Like i said, i am new in business and learning.

    Well, to really complete your learning, forget about telling everyone up front. They are supposed to get a 1099, they are supposed to know they are getting one. You have zero obligations to inform anyone you issue them, you're supposed to issue them. You have as much obligation to inform a vendor you are going to issue a 1099 to them as they have to inform you that they will expect to be paid for the work they are going to do. Both are a given. 

    0Reply
  • Jeremiah H.
    Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes
    10y
    I disagree it's a given in their profession. If it was a given we wouldn't be having this conversation.
    4Reply
  • David Roberts
    OP
    Brownstown, MI · Member since 2014 · 344 posts · 98 votes
    10y

    I try to be honest with people and do things the right way in all aspects of my life.  I dont try to pull stuff on people because that's not what I would want done to me. Im sure this won't be the last time i find out something i should have known but didnt.  But the last thing i want to have to do is pay HIS taxes!

    0Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    10y

    @David Roberts Sounds like you now know why the roofer was so cheap.

    3Reply
  • Mike F.
    Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes
    10y
    Originally posted by @Jeremiah H.:

    I disagree it's a given in their profession. If it was a given we wouldn't be having this conversation.

    It's a given to anyone who owns a business. The IRS makes no exceptions for roofers.

    How this guy runs his busienss is not a concern to David Roberts. The IRS requires David to file a 1099, it's not an option. David is following the law. The roofer's experiences with shady customers has no bearing on David and the requirements of the IRS.  David is getting good advice from his accountant and learning how to run his business properly, the roofer needs to catch up. It's no more David's job to educate the roofer on how to run a business than it would be for David to educate the roofer on how to install a roof.

    3Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    "I lost a good, cheap roofer over it, too."

    As someone else mentioned it sounds like you were getting an "under the table, non-taxed rate".

    That's not legal but it sounds like some other investors will look the other way.

    You just need to be clear in the future that you do EVERYTHING above board and will issue 1099's.

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    0Reply
  • Russell Naylor
    Colorado Springs, CO · Member since 2016 · 214 posts · 58 votes
    10y

    If he was that mad over something that is a legal requirement and something you were doing to protect your business, my guess is he isn't running is correctly/legally. I'd just make it known up front next time that you'll be issuing them, but any reputable person running a sound business should be okay with this.

    0Reply
  • Mike F.
    Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes
    10y
    Originally posted by @Joel Owens:

    You just need to be clear in the future that you do EVERYTHING above board and will issue 1099's.

    Why does David need to declare to anyone he does business with that he does things legally? 

    I'm getting kind of nervous as to what would too many of you are operating in?

    Do you walk into a bank and let the security guard know "Hey, I'm not going to rob the bank, I'm here to make a deposit?" When you go out to eat do you let the waitress know that you have no intentions of paying the bill with counterfeit bills? I don't understand this mentality of having to declare honest intentions to dishonest people. 

    4Reply
  • Allen Thomas
    Real Estate Agent · Austell, GA · Member since 2014 · 232 posts · 74 votes
    10y

    You definitely did the right thing. I have had to deal with the same issue. The problem with cheap labor is that the laborers are typically operating underneath the IRS' radar...

    0Reply
  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    10y

    Wanting to clarify, these 1099s are issued to individuals who are doing these contractor jobs. 

    The rules differ on it being a corporation. I think you might have to 1099 a LLC contractor?

    I'm fairly certain I have this correct, please tell me if I'm confused.

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    Not to defend the roofer here....but his quote for the work may have been low since he assumed he wouldnt be paying taxes on the money. 

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  • Stone Teran
    Investor · Cincinnati, OH · Member since 2015 · 374 posts · 120 votes
    10y
    Originally posted by @Mike F.:
    Originally posted by @Joel Owens:

    You just need to be clear in the future that you do EVERYTHING above board and will issue 1099's.

    Why does David need to declare to anyone he does business with that he does things legally? 

    I'm getting kind of nervous as to what would too many of you are operating in?

    Do you walk into a bank and let the security guard know "Hey, I'm not going to rob the bank, I'm here to make a deposit?" When you go out to eat do you let the waitress know that you have no intentions of paying the bill with counterfeit bills? I don't understand this mentality of having to declare honest intentions to dishonest people. 

     I completely agree!

    Lots of smaller roofers (and other tradesmen for that matter) are dishonest when it comes to taxes because it's fairly easy to get away with it.  I'm glad, David, that you run your business legitimately.  Never apologize for doing what's right (and legal).

    1Reply
  • Stone Teran
    Investor · Cincinnati, OH · Member since 2015 · 374 posts · 120 votes
    10y
    Originally posted by @Nicole A.:

    Wanting to clarify, these 1099s are issued to individuals who are doing these contractor jobs. 

    The rules differ on it being a corporation. I think you might have to 1099 a LLC contractor?

    I'm fairly certain I have this correct, please tell me if I'm confused.

    You 1099 an individual, (most) LLC's and partnerships.

    You don't 1099 a c-corp, s-corp or LLC's taxed as a corp (which is somewhat rare).

    1Reply
  • Bonnie Rakes
    Investor · Ponca City, OK · Member since 2016 · 46 posts · 15 votes
    10y
    Originally posted by @David Roberts:

    So 2015 was my first full year in the real estate business.  Someone published an article a week or two ago about making sure we get our 1099s together out to our contractors and such.  I honestly didn't know I had to do that, so I called my CPA and asked about it.

    I told him that I had a roofer guy do 2 roofs for me (I paid him over 10k) and my main contractor which I paid 27k+ last year.

    My CPA suggested I 1099 both of those guys, and to try to get their SSN but if not, still 1099 them to protect the business.

    I called my contractor and he was ok with it, although he acted a little surprised I was asking.  He even gave me his SSN.  

    The roofer,  I didn't bother to even ask.  He's a roughneck type and I knew he would not be happy.  So I just got the phone call.  I saw his name pop up, and I 'gulped' lol.

    I'm not sure he was even aware of what the 1099 was, but he was livid. I  couldn't even get a sentence in without getting cut off repeatedly about how I'm acting like he's done 15 roofs for me and "I've done several others for everybody else and nobody's ever 1099'd me".

    When i asked if I could explain what the paper was and why I had to issue it he just cut me off and said he didn't care to hear it.  At the end he told me to lose his number and never call him again.

    Did I do anything wrong?  Should I not have sent him one?  I was just trying to protect the business and do the right thing.  I lost a good, cheap roofer over it, too.

     I THINK YOU BLEW IT.... it appears you knew the roofer was not going to like it...and you didn't let him know in advance. if you didn't get his information for the 1099 up front, he just got hit with a tax bill that he didn't factor into his estimate.  I know many rehab folks don't 1099, even though they should. And the roofer probably knows it is always a possibility. I just prefer to be up front with all my contractors.... just as I don't want surprises from them, they don't want surprises from me either... JMHO

    1Reply
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